Unable to Complete CDD Measures: Tanzanian Securities Industry Struggles with Customer Due Diligence
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In a worrying trend, several financial institutions in Tanzania’s securities industry have reported difficulties in completing customer due diligence (CDD) measures. This has raised concerns about the effectiveness of anti-money laundering (AML) and combating the financing of terrorism (CFT) efforts.
Challenges in Completing CDD Measures
According to sources within the industry, some customers are reluctant or unable to provide necessary information, making it challenging for financial institutions to comply with CDD requirements. As a result, several institutions have been forced to withdraw pending applications or terminate existing business relationships.
The Importance of Implementing Robust CDD Measures
The Tanzanian Financial Intelligence Unit (FIU) and the Capital Markets and Securities Authority (CMSA) have emphasized the importance of implementing robust CDD measures to prevent money laundering and terrorist financing in the securities industry. However, the recent struggles faced by financial institutions suggest that more needs to be done to address these challenges.
Internal Policies and Compliance
Guidelines for Internal Policies and Procedures
In an effort to strengthen AML/CFT efforts, the CMSA has introduced guidelines for internal policies and procedures. The guidelines require financial institutions to develop and implement policies, procedures, and controls to prevent money laundering and terrorist financing. This includes:
- CDD measures
- Record retention
- Detection of unusual transactions
- Suspicious transaction reporting
AML/CFT Officer and Audit Function
Financial institutions are also required to appoint a management-level officer as the AML/CFT officer, who will have access to all customer records and relevant information. Furthermore, institutions must maintain an audit function that can regularly assess their internal policies and procedures to ensure compliance with regulatory requirements.
Training and Employee Screening
Importance of Employee Training and Screening
The CMSA guidelines also emphasize the importance of training employees and agents on AML/CFT laws and regulations, including CDD measures, detecting suspicious transactions, and reporting suspicious activity. Additionally, financial institutions must have in place screening procedures for hiring employees and agents to ensure high standards are maintained.
Foreign Branches and Subsidiaries
Group Policy on AML/CFT
Financial institutions with foreign branches or subsidiaries must develop a group policy on AML/CFT and extend it to all relevant entities outside Tanzania. Where the host country’s AML/CFT measures differ from those in Tanzania, financial institutions must apply the higher of the two standards, subject to the laws of the host country.
Reporting Conflicts
The CMSA has emphasized that where conflicts arise between Tanzanian law and the law of a host country or jurisdiction, financial institutions must report this to the FIU/CMSA and comply with further directions as may be given by the Authority.
Effective Date
These guidelines became effective on February 1st, 2012. Financial institutions in Tanzania’s securities industry are advised to familiarize themselves with these guidelines and take immediate action to strengthen their AML/CFT efforts.
In conclusion, while financial institutions in Tanzania’s securities industry face challenges in completing CDD measures, it is essential that they prioritize AML/CFT efforts to prevent money laundering and terrorist financing. The CMSA and FIU will continue to monitor the situation and provide guidance as necessary.